The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how defense contractors stocks fared in Q2, starting with CACI (NYSE:CACI).
Defense contractors typically require technical expertise and government clearance. Companies in this sector can also enjoy long-term contracts with government bodies, leading to more predictable revenues. Combined, these factors create high barriers to entry and can lead to limited competition. Lately, geopolitical tensions–whether it be Russia’s invasion of Ukraine or China’s aggression towards Taiwan–highlight the need for defense spending. On the other hand, demand for these products can ebb and flow with defense budgets and even who is president, as different administrations can have vastly different ideas of how to allocate federal funds.
The 14 defense contractors stocks we track reported a strong Q2. As a group, revenues beat analysts’ consensus estimates by 3.3% while next quarter’s revenue guidance was in line.
Luckily, defense contractors stocks have performed well with share prices up 14.5% on average since the latest earnings results.
CACI (NYSE:CACI)
Founded to commercialize SIMSCRIPT, CACI International (NYSE:CACI) offers defense, intelligence, and IT solutions to support national security and government transformation efforts.
CACI reported revenues of $2.30 billion, up 13% year on year. This print exceeded analysts’ expectations by 0.5%. Despite the top-line beat, it was still a mixed quarter for the company with a beat of analysts’ EPS estimates but a significant miss of analysts’ backlog estimates.
Interestingly, the stock is up 1.9% since reporting and currently trades at $485.59.
Founded in 1981, Mercury Systems (NASDAQ:MRCY) specializes in providing processing subsystems and components for primarily defense applications.
Mercury Systems reported revenues of $273.1 million, up 9.9% year on year, outperforming analysts’ expectations by 11.9%. The business had an incredible quarter with an impressive beat of analysts’ organic revenue and EPS estimates.
The market seems happy with the results as the stock is up 43.8% since reporting. It currently trades at $77.25.
Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE:LMT) specializes in defense, space, homeland security, and information technology products.
Lockheed Martin reported revenues of $18.16 billion, flat year on year, falling short of analysts’ expectations by 2.3%. It was a softer quarter as it posted full-year EPS guidance missing analysts’ expectations.
Interestingly, the stock is up 5.7% since the results and currently trades at $487.85.
Building Nimitz-class aircraft carriers used in active service, Huntington Ingalls (NYSE:HII) develops marine vessels and their mission systems and maintenance services.
Huntington Ingalls reported revenues of $3.08 billion, up 3.5% year on year. This number surpassed analysts’ expectations by 5.5%. It was a strong quarter as it also logged an impressive beat of analysts’ EBITDA estimates and a beat of analysts’ EPS estimates.
The stock is up 7.8% since reporting and currently trades at $278.78.
Established with a commitment to supporting national security, Kratos (NASDAQ:KTOS) is a provider of advanced engineering, technology, and security solutions tailored for critical national security applications.
Kratos reported revenues of $351.5 million, up 17.1% year on year. This result topped analysts’ expectations by 15%. Overall, it was a strong quarter as it also put up a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ EBITDA estimates.
Kratos scored the biggest analyst estimates beat among its peers. The stock is up 47% since reporting and currently trades at $86.93.
Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. The cherry on top? Recent rate cuts (half a point in September 2024, a quarter in November) have propped up markets, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there’s still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy.
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